Beijing:JPMorgan & Chase Co will see record revenues from China this year, as the second-largest US bank benefits from a surge in equity raising by Chinese companies, the head of the bank’s China investment banking business said on Monday at the Reuters China Investment Summit.
JPMorgan’s China revenue will rise more that 80% over 2009 levels, and up 40% over the bank’s previous record for China in 2007, said Fang Fang, the bank’s CEO of China investment banking.
“Our pipeline is now stronger than ever, with a number of deals landing in January,” Fang said at the Summit held at the Reuters office in Beijing. “A lot of clients are coming to talk to us about next year.”
Asia, and China in particular, is a key source of investment banking revenue for global banks. Agricultural Bank of China Ltd’s record $22.1 billion IPO, in which JPMorgan participated, is a case in point.
The bank’s number of completed deals will also be about 80% higher than last year.
Fang, who is also a member of the Chinese People’s Political Consultative Conference, a largely ceremonial advisory body to parliament, predicted a rise in debt and equity deals in a number of Chinese sectors in 2011, including financial services, health care, transportation, education, food and beverage and luxury goods.
“It’s related to the increase in household disposable income,” Fang said, referring to the rising demand for capital.
JPMorgan is doing deals — both equity and debt — with a much wider range of companies than in the past, he said, which could help shield the bank in the event of any economic turbulence in China.
“In the past, our business was like a 9-inch, black-and-white TV with one channel: state-owned enterprises going public offshore,” he said. “Now it’s like a 52-inch plasma TV with 30 channels. If one or two channels go blank, we still have others.”
Priorities for 2011 include hiring more investment bankers and significantly increasing clients and products and services through a planned joint venture with a Chinese partner, said Fang, a graduate of Tsinghua and Vanderbilt Universities who is also vice-chairman of JPMorgan’s Asia investment banking.
The joint venture, with First Capital Securities Co Ltd of Shenzhen, will allow JPMorgan to tap China’s lucrative underwriting market.
“Right now we can only raise money for Chinese clients offshore,” Fang said. “With a domestic securities license we will be able to provide clients with renminbi equities and bonds capabilities.
“Most importantly, we are looking at increasing the number of clients we cover in China and we want to offer more products to them,” Fang said.
Getting a license to operate in yuan currency securities markets “is very important to us,” he said. “Not initially from a revenue point of view, but we want the ability to go to our best clients and say we can do both offshore and domestic business.”
The joint venture, in which JPMorgan will hold a one-third stake, is awaiting regulatory approval. JP Morgan is behind rivals such as UBS Securities, Goldman Sachs or Credit Suisse, which already have established JVs with Chinese partners.
While it does not break out revenue by country, JPMorgan said in October that its third-quarter global investment banking profit fell by a third to $1.2 billion.
Investment banking revenue for the Asia-Pacific region grew 6 percent in the first nine months of this year compared with the same period last year, while investment banking revenue for Europe, the Middle East and Africa fell 29%, and declined 8% for the Americas.